Last year Gov. Dennis Daugaard reconfigured South Dakota's trust task force. The state register listed the appointments, but his office didn't announce them.
Before the Oct. 20 reorganization there were 18 members. Daugaard had nine stay and picked two more. He also ended having a legislator be chairman.
Bill Janklow formed the task force in 1997 during his third term as governor. For 20 years membership was open-ended. Daugaard decided to set a term of three years.
What happened during those 20 years is South Dakota went from afterthought to national leader in the trust business.
The topic seems boring but the amounts in raw dollars sound staggering.
Nine banks have public trust departments. Their assets varied, from about $2 million to about $34 billion. That's billion, with a "b."
The largest private trust had about $20 billion, again, with a "b."
Altogether 95 trusts held South Dakota charters as of Dec. 31, 2017. That's 30 more than at the end of 2012.
The state Division of Banking meanwhile received about $1.4 million in fees last budget year to oversee them.
"I used to chair this task force and I consider its work important," Daugaard said Friday, explaining why he revamped.
"Over time, the task force had become too large, and I wanted to limit it to those who are active in the trust industry," he said.
"I also didn't want any one firm to have more than one member," he continued. "I also want the task force to be industry-led, rather than relying on the banking division to carry its legislative proposals."
The South Dakota Trust Association for the first time sent a lobbyist, lawyer Terra Fisher of Pierre, to the legislative session last year.
What set up South Dakota was a change the Legislature made for Homestake Mining Co. in 1983. Lawmakers removed the 100-year cap so a business could operate in perpetuity.
Returning members of the task force are Frances Becker and Patrick Goetzinger of Rapid City; Thomas Simmons of Vermillion; and Jennifer Bunkers, Anne Marie Feiock, Bradley Grossenburg, Peter Randazzo, Carl Schmidtman and Mark Sivertson of Sioux Falls. Dixie Hieb of Sioux Falls and Jim Riswold of Dell Rapids are new.
Trusts chartered in South Dakota can operate elsewhere in the nation using trust service offices. During calendar 2017, the division approved applications for nine new charters in South Dakota and five trust services offices in De Pere, Wisconsin; Sioux Falls; Bloomington, Minnesota; Miami, Florida; and Brookfield, Wisconsin.
The governor's trust task force "has been assembled with the goal of establishing and maintaining South Dakota's stature as the premier trust jurisdiction in the United States," according to the Division of Banking website.
The Legislature is considering two bills this session that deal with trusts. They are scheduled for a Senate Judiciary Committee hearing Feb. 20. The House of Representatives passed them Jan. 18.
Rep. David Lust, R-Rapid City, is a past chairman for the task force. Lust said he wasn't privy to the governor reworking it. He doesn't see much impact on the current legislation.
"The trust industry has established itself pretty well with the Legislature and with the Division of Banking so I think there is general confidence that the annual task force bill is brought in good faith and is not detrimental to South Dakota or its citizenry," Lust said.
Sen. Jeff Partridge, R-Rapid City, is the lead Senate sponsor of one bill. "The trust task force was rooted in the governor's office but overseen by the Legislature," Partridge said.
"Governor Daugaard has proposed that it is no longer necessary to insist that this is a 'Governors' task force because it has solid backing by the Legislature, industry experts and the people of South Dakota," Partridge continued.
He added, "The trust task force is comprised of diligent professionals that work hard to fortify and improve our South Dakota trust environment. They do not suggest a change unless they are unanimous. Changes that are in the bill that I am sponsoring are part of this effort."
How South Dakota trust laws work
South Dakota doesn't have a state income tax on individuals or on most businesses, and state laws allow trusts to operate forever. South Dakota chartered trust companies pay a financial institution tax to state government under SDCL 10-43-90.
The state tax is tiered over the first five years of operations, according to the state Division of Banking. The division regulates South Dakota chartered trust companies.
The annual minimum tax is $500 for fewer than 12 months of operations, according to the division.
The tax rises to $2,000 for over 12 months but less than 24 months of operations; then $5,000 for over 24 months but less than 36 months; then $10,000 for over 36 months but fewer than 48 months; and becomes $25,000 annually after 48 months.
The division also collects administrative fees to oversee trusts. State administrative rules set those fees.
There is a non-refundable application fee of $5,000. A trust must have at least $200,000 of assets to receive a South Dakota charter. The company must file a 12-page application.
Once chartered, there is an annual state fee of seven cents per $10,000 of assets in the trust. But there are specific ranges governing the administrative fee.
For private trust companies that manage private assets for the benefit of a family or families, the minimum annual fee is $3,750 and the maximum annual fee is $20,000.
For public trust companies that offer public accounts, the minimum annual fee is $4,500 and the maximum annual fee is $30,000.
State rules further require trust companies pay the actual cost for each on-site examination.
Rules also require a trust company pay additional supervision costs if operating under an enforcement action.
Trust company managers and directors must swear oaths to the state division they will follow South Dakota trust laws.
All new hires must file to the division a six-page biographical report that asks questions such as whether the person had resigned or was terminated from any previous employment.
The siting requirements to receive a South Dakota trust charter aren't extensive. For public trust companies, they are:
• Maintain office space in South Dakota for trust company business and for the storage of, and access to, trust company records required by state law;
• Hold no less than two quarterly governing board meetings, with a quorum physically present in South Dakota, each calendar year;
• Employ, engage, or contract with at least one trust officer or key employee to provide services for the trust company in South Dakota related to the powers of the company and the examinations required by state laws; and
• Perform trust administration in South Dakota.
Meeting the office space requirement means, according to the division:
• Be in premises distinct and divided from the office space of any other entity;
• Have the name, charter, and certificate of authority of the trust company prominently displayed;
• Have access to premises in or adjacent to the office space sufficient to facilitate onsite examinations by the division;
• Have a secure fireproof file cabinet for hard copies of any documents required by state law to be kept; and
• Have a secure computer terminal or other secure electronic device that provides access to electronic records, including account information.
The division director can approve other arrangements if the risk is low or the space isn't sufficient for onsite examinations.
As for trust administration, the division publishes a list that says at least three of six duties shall "performed wholly or partly in South Dakota for the accounts under the management, administration, or custody of the trust company."
Those six are annual account reviews, annual investment reviews, trust accountings, account correspondence, completing trust account tax returns or distributing account statements.
But the director again can approve other arrangements regarding trust administration if the risk is low or if there is need for more of the duties to be performed in South Dakota.